Co-op racing to address sales drop, cash crunch, bone broth surfeit

HUMBOLDT – The winds of change that wiped out the Arcata Co-op’s iconic information kiosk earlier this year are still blowing, and this time they’re threatening to knock down the whole store – and the one in Eureka, too.

Northcoast Co-op is under unprecedented financial pressure, which, in presentations to members, a column in Co-op News and internal memoranda, management attributes to a number of causes. These include declining sales, increased competition, loss of differentiation with other stores, loss of experienced personnel, equipment failures, personnel and health care costs, unbudgeted expenses, inaccurate projections, even cannabis legalization and a solar eclipse.

The heightened competition came about after the opening of a new Eureka Natural Foods store offering many of the same products in McKinleyville, as well as the opening of a Grocery Outlet store there. Wildberries Marketplace is known to have been hit by the competition as well, and has curtailed its print advertising, among other cost-cutting measures.

Co-op General Manager Melanie Bettenhausen outlined the problems and solutions at meeting of the stores’ Board of Directors over the last few weeks.

Attempting to temper and reverse the challenges, Co-op management is implementing several measures as well as asking members assistance in fortifying its financial position and increasing sales.

Among its first actions was to fire its former financial controller “for incompetence,” according to a memo. Several months were then spent cleaning up the stores’ books. Towards this end, RFS, a CPA firm specializing in grocery stores, was hired.

A peer audit was conducted by National Co+op Grocers, a national purchasing cooperative of which North Coast Co-op is a member.

Owner Tom Perrett has been marketing the Ten Pin Building in hopes of finding a new tenant once Co-op moves out.

Among the suggestions made by the national association were hiring of a new controller; elimination of an inventory advance-buying program and evacuation of the nearby Ten Pin Building warehouse to save $8,100 per month; a $600,000 inventory reduction; reduction of management staff and other personnel by attrition; working out deals with vendors to delay payments; and obtaining a working capital loan to upgrade the Eureka store.

Many of the goals have been wholly or partially accomplished, and more measures are in the works. One is obtaining an increase in the store’s credit line from $149,000 to $500,000 to help get through the holiday season.

The holidays present their own financial pressures, including traditional solstice bonuses (foregone by management this year) and holiday pay.

Bettenhausen acknowledges that management didn’t act quickly enough to address the financial near-collapse, but blamed that partly on inaccurate financial information provided by the former controller.

In fact, the stores’ are now projected to run out of cash by Dec. 8, though that doesn’t mean store closure.

“We’re not closing our doors,” Bettenhausen said. Even without the hoped-for credit line increase, she said, the stores will muddle through the holidays “by the skin of our teeth.”

Meanwhile, management, department heads and employees are rallying in common cause to boost sales via several means.

One is a direct appeal to Co-op’s 18,000 members to support their stores. Publicity of Co-op’s woes brought in $7,000 in new share investments week before last.

At last week’s board meeting, a number of new merchandising improvements and sales promotions were discussed and are presently being implemented.

“I’m inspired by what our employees have done to basically save their Co-op,” Bettenhausen said.

A boney boondoggle

As Bettenhausen and the boardmembers made their presentation in the soon-to-be-abandoned warehouse, behind them loomed a short but lengthy wall of boxes labeled BONE BROTH PROTEIN in blaring capital letters – the figurative elephant in the room in terms of symbolizing cash tied up in merchandise.

For anyone still on the Keto Diet, here's a great opportunity. KLH | Union

Someone in the audience finally brought up the brothy boondoggle, semi-facetiously suggesting that the product be featured on the Dr. Oz show so as to inspire a new food fad that might reduce the stockpile.

Bettenhausen said that was what motivated the buy in the first place – bone broth had been suggested as a low-carb supplement to the now-waning ketogenic diet fad. Google Trends shows searches for the "keto diet" having peaked during the spring and summer, then dropping off.

However, Co-op is moving to rid itself of the boney bloat. Bettenhausen said the some of the stockpiled substance might be donated to disaster relief organizations. Meanwhile though, the store is aggressively marketing it with a prominent end cap display. There, the gluten-free bone powder is on sale in all its forms – chocolate, vanilla, turmeric and other tempting flavors.